Starting an RESP For Your Grandchildren

As a grandparent, you want what’s best for your grandchild. With the increased costs of education these days, there is no better way to support your kin than to start a Registered Education Savings Plan (RESP). An RESP is simple to start and comes with government incentives that help to increase the value. It’s an excellent way to shelter a little more cash from taxes while contributing to the future of your loved ones. Here we discuss what you need to know when contributing to an RESP.

How does an RESP work?

As a subscriber, you would make contributions to the RESP. The promoter, often a financial institution, will register the RESP with the Canada Revenue Agency. Your contribution, along with government grants and tax-sheltered income earnings, will accumulate in the account. The promoter will then pay the income earned along with the contribution amount when the beneficiary, your grandchild, is enrolled in an education program.

How much can you contribute?

You can contribute as much as you like each year and with a lifetime limit of $50,000 for each beneficiary. Just know that your RESP contributions are not tax deductible but are tax-sheltered.

How does the withdrawal work?

The contribution amount you contributed is after-tax income so, it can simply be withdrawn and made payable to you or your grandchild with no further taxes to worry about. The Educational Assistance Payment (EAP) amount however, is a withdrawal of funds that originates from the tax-free government grants (Canada Education Savings grant, the Canada Learning Bond, and amounts paid under the Provincial Education Savings Program) and tax-sheltered income earnings. For this reason, these payments will need to be included in your grandchild’s income statement for their annual taxes, but at the student’s minimal tax rate.

What if they don’t attend school?

If the beneficiary does not go to post-secondary school, then the contribution amount is paid out to you, the subscriber, at the end of the contract. At that time, you would not be required to include the contributions in your income statements.


In Canada, all the contributions you make into an RESP will grow tax-free until withdrawn. You may also be eligible for the Canadian Educational Savings Grant where the government will match 20% at $500 per year and $7,200 over a lifetime. This makes an RESP a better inheritance contribution for your grandkids than money, as the money that you were planning to give your children can now be shielded from taxes as it grows. This won’t happen with cash inheritance and real estate.

If you’re interested in opening an RESP, reach out to a trusted advisor from The Beacon Group of Assante Financial Management Ltd. today who can walk you through all the necessary rules and regulations set out by your province The sooner you put in, the more the contributions will grow for your grandchild’s education.